UK government under fire over Carillion liquidation

LONDON — The U.K. government is facing questions over why it awarded contracts to the troubled outsourcing company Carillion, which filed for compulsory liquidation on Monday.

David Lidington, the minister for the Cabinet Office, said the government would provide funding to maintain public services after crisis talks over the weekend failed to raise enough funds to keep the government contractor afloat.

"It is regrettable that Carillion has not been able to find suitable financing options with its lenders but taxpayers cannot be expected to bail out a private sector company," Lidington said in a statement, adding that employees should still go to work and that they would be paid.

Carillion is Britain's second-largest construction and outsourcing firm, holding public contracts equating to billions of pounds and employing 43,000 people, with around 20,000 of them in the U.K.

Asked whether the government would review its due diligence procedures in awarding contracts, the prime minister’s official spokesman said that “if there are lessons to be learned, then they will be.”

The spokesman added that there was no risk to the flagship HS2 railway project — a high-speed rail network from London to Birmingham and to Manchester and Leeds — that Carillion, alongside two other firms, was awarded a contract to deliver sections of in July.

“We understand that some members of the public and staff in particular are going to be concerned … We stand ready to help them in the usual way. It’s obviously too early to say what the outcome will be in relation to each individual contract which Carillion holds but we will provide what help is needed.”

British ministers are under increasing pressure to explain why significant public contracts were awarded to the company despite red flags about its finances, such as its first profits warning last year, with Transport Secretary Chris Grayling singled out for criticism.

Shadow Business Secretary Rebecca Long-Bailey told the BBC Radio 4 Today program she expected the government to make a statement in the House of Commons on Monday.

Jon Trickett, Labour's shadow minister for the Cabinet Office, urged the government to "act quickly to bring these public sector contracts back in-house" and called for a “serious investigation” into the government's handling of the matter.

Vince Cable, the Liberal Democrat leader and a former business secretary, also said a public inquiry was needed to look into some of the “very questionable decisions made in the past few months.”

The government should take responsibility or re-tender the big contracts to protect jobs and minimize the damage to the capacity of the construction industry, Cable said.

“Carillion’s collapse raises grave concerns about jobs, the delivery of public services and the way Government conducts its business," public accounts committee Chair Meg Hillier said in a statement Monday.

“Government now faces a stark choice: Bail Carillion out or let public services and projects suffer," she added. "Either way, taxpayers will get a raw deal ... Government has serious questions to answer about its role in allowing taxpayers’ exposure to escalate to this point.”

Lidington insisted Monday the government had been closely monitoring the situation since profit warnings were first issue in July and said there had been "constructive discussion" with Carillion while it sought to refinance its business.

"We remained hopeful that a solution could be found while putting robust contingency plans in place to prepare for every eventuality," Lidington said in the statement.

Stefan M

Alex T

1. Brexit has already been initiated. Keep up with the news.
2. The failure or Carillion has nothing to do with Brexit. Read the news.

Posted on 1/15/18 | 10:44 AM CET

Ian

Alex T
Expect more comments from Pro EU supporters blaming any company folding on Brexit .
The irrational comments by the likes of Stefan M , and those that think like him are astounding , but laughable .
In the minds of his like , NO LARGE COMPANY ever folded before the referendum, or the issue of article 50 .

Whilst a full member of The EU , Greece ( a whole country) went bust .

Posted on 1/15/18 | 11:09 AM CET

Eric

No You must be a bank to be bailed out by the UK government

Posted on 1/15/18 | 12:29 PM CET

Priscilla du Bleu

What brekkie again stated yesterday that being a native English speaker is of advantage in the business world?

Ah well …..

Posted on 1/15/18 | 12:33 PM CET

dusty

pension funds should beware of company CEO’s named Philip Green it is a shame this one has not been Knighted yet.

Posted on 1/15/18 | 1:37 PM CET

YellowSubmarine

I don’t see the Government has any serious questions to answer. Carillion were given contracts and were paid for work done. If work stops they don’t get paid, it does not cost the taxpayer any more than if the company had continued to operate.

It could interfere with service provision but the Government can pay the liquidator to continue operations until the situation can be sorted out. An inquiry WOULD be a waste of tax payer money.

Issuing Government contracts gave Carillion the chance to restructure and attract more financing, it was a life line provided by Government to save jobs.

Does Cable think this is a bad thing ? if so he has lost any business sense he might have had in the past and is now just out for political point scoring. If the company had not been offered Contracts then he and the Labour party would have been the first to say the Government had pulled the rug from under Carillion’s feet.